GBP/USD and EUR/GBP - Prices, Charts, and Analysis
- Cable is less than one point away from making a fresh 10-month high.
- EUR/GBP testing resistance on Euro strength.
The British Pound is moving in different directions against the US dollar and the Euro as interest rate expectations for all three currencies continue to make their mark. In the UK, the Bank of England (BoE) is expected to hike rates by 25 basis points on May 11th and be open to hiking again if inflation remains stubbornly high. The US Federal Reserve (Fed) is also expected to raise its main borrowing rate by 25bps on May 3rd but there are growing expectations that the Fed will then pause its rate hiking cycle as fears of a recession grow in the US. One day after the Fed meeting, the European Central Bank (ECB) will announce its latest monetary policy decision with the market currently looking at either 25bps or 50bps of rate hikes. The ECB is also expected to hike interest rates further unless data provides a strong reason to pause.
Interest Rates and the Forex Market
These three central bank decisions, and predictions going forward, are now being seen in both GBP/USD and EUR/GBP as interest rate differential expectations take over.
DailyFX Central Bank Calendar 2023
While rate expectations are currently driving sentiment, the economic calendar is full of market-moving data releases this week that will affect both the US dollar and the Euro, including growth and inflation data for both areas.
GBP/USD has been trading sideways in a two-point range for most of April and is now looking to test a multi-month resistance level at 1.2547 again. The 20-day simple moving average is supporting the move higher, along with a prior short-term level of support at 1.2447. The Average True Range (ATR) for the pair is at a multi-month low, highlighting the recent lack of volatility in the GBP/USD.
GBP/USD Daily Price Chart – April 25, 2023
Chart via TradingView
| Change in | Longs | Shorts | OI |
| Daily | -9% | 18% | 3% |
| Weekly | -1% | 1% | 0% |
Retail Traders Increase Their Net-Short Positions
Retail trader data show 39.69% of traders are net-long with the ratio of traders short to long at 1.52 to 1.The number of traders net-long is 3.75% lower than yesterday and 22.95% lower from last week, while the number of traders net-short is 8.55% higher than yesterday and 24.20% higher from last week.
We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests GBP/USD prices may continue to rise. Traders are further net-short than yesterday and last week, and the combination of current sentiment and recent changes gives us a stronger GBP/USD-bullish contrarian trading bias.
EUR/GBP is looking to push higher and back into a level of resistance that has contained recent attempts to break higher. The recent tight range of between 0.8721 and 0.8866 has provided range traders with opportunities over the last six weeks and may still do so if resistance holds once more. The technical set-up is looking increasingly positive with a cup and handle pattern formed since the March 22 high. The 20-day and 50-day simple moving averages are also positive for EUR/GBP.
EUR/GBP Daily Price Chart – April 25, 2023
Chart via TradingView
Retail trader data shows 36.09% of traders are net-long with the ratio of traders short to long at 1.77 to 1.Traders are further net-short than yesterday and last week, and the combination of current sentiment and recent changes gives us a stronger EUR/GBP-bullish contrarian trading bias
What is your view on the GBP/USD and EUR/GBP – bullish or bearish?? You can let us know via the form at the end of this piece or you can contact the author via Twitter @nickcawley1.
